SL Green Hikes Dividend, Raises Share Repurchase Program

Ringing in good tidings for its shareholders, SL Green RealtySLG announced a 4.8% increase in its fourth-quarter dividend and announced a $500-million increase to its share buyback program.

Particularly, this real estate investment trust (REIT) will now pay a dividend of 81.25 cents per share — up from 77.50 cents paid earlier. The raised dividend will be paid on Jan 16, 2018, to shareholders of record as on Jan 2. Based on the increased rate, the annual dividend comes to $3.25 a share, resulting in an annualized yield of about 3.2%, considering SL Green’s closing price of $102.03 on Dec 1.

In fact, solid dividend payouts are arguably the biggest enticement for REIT investors and this represents SL Green’s 7th consecutive year of common dividend hike. It reflects the company’s continued efforts to boost shareholders’ wealth.

Moreover, SL Green’s $500 million additional authorization to its August 2016 share repurchase program brings the share buyback program to a total of $1.5 billion. As of Dec 1, 2017, the company has already repurchased 5,673,227 shares at an average price of $101.71.

According to the company’s chief executive officer, Marc Holliday, the company continues to make use of liquidity from disposition of assets to buy back its common stock at considerable discounts to Manhattan real estate’s private market valuations and its own net asset value.

SL Green has robust fundamentals to back dividend hikes and share repurchases. Notably, this New York City-based reputed landlord enjoys high-quality office properties as well as diverse tenant base, makes opportunistic investments and has solid balance-sheet strength. Moreover, SL Green is seeking to tap opportunities in New York City’s premium retail locations with its retail investments complementing the company’s core office and structured finance businesses. In addition, its leasing activity is likely to remain decent amid an improving economy and job market environment.

The company observes stringent financial policies and has solid access to capital. Also, it has manageable, well-balanced debt expiry schedules. This will likely help the company sustain its dividend payout to equity investors.

However, SL Green faces intense competition from developers, owners and operators of office properties, and other commercial real estate which limit its pricing power. Also, rate hike remains another concern.

Shares of SL Green have outperformed the industry it belongs to, in the past three months. This Zacks Rank #3 (Hold) company’s shares have gained 6.6%, while the industry recorded growth of 1.1% during this time frame.

Franklin Street Properties’ Zacks Consensus Estimates for 2017 FFO per share remained unchanged at $1.05 over the past month. Its share price has ascended 9.2% in three months’ time.

Columbia Property Trust’s FFO per share estimates for the current year have moved up 2.7% to $1.15 in a month’s time. Its shares have gained 7.8% over the past three months.

Urstadt Biddle Properties’ FFO per share estimates for fiscal 2017 remained unchanged at $1.25 over the past month. Its shares have rallied 12.7% in three months’ time.

Note: All EPS numbers presented in this report represent funds from operations (FFO) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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